By PAUL WISEMAN and ANNE D’INNOCENZIO (AP Business Writers)
WASHINGTON (AP) — Employers in the US hired fewer people in April, but still managed to add 175,000 jobs, indicating that the strong job market in the US may be slowing due to consistently high interest rates.
The government report on Friday revealed that the increase in hiring last month sharply decreased from the substantial rise of 315,000 in March and was well below the 233,000 gain predicted by economists for April.
However, the slower rate of hiring and a decrease in wage growth last month could be seen as positive by the Federal Reserve, which has maintained high interest rates to combat persistently high inflation. Hourly wages only rose 0.2% from March and 3.9% from a year earlier, the smallest annual increase since June 2021.
The Fed has been postponing any consideration of cutting interest rates until it is more certain that inflation is consistently decreasing towards its goal of 2%. Lowering rates by the central bank would eventually decrease the cost of mortgages, auto loans, and other borrowing for consumers and businesses.
Stock prices rose and bond yields fell on Friday after the jobs report was released, as there was hope that rate cuts might now be more likely in the coming months.
“A decrease in payrolls to a reasonable level at the beginning of the second quarter, along with a slowdown in wage increases, will be positive news for the Fed's policymakers,” said Rubeela Farooqi, the chief US economist at High Frequency Economics. “The current data also supports the idea that rate cuts – not rate hikes – are the most likely scenario for the Fed this year.’’
The state of the economy is a concern for voters as the November presidential campaign heats up. Despite the strength of the job market, Americans are still frustrated by high prices, with many pointing the finger at President Joe Biden.
Even with the slowdown in hiring in April, there was still a significant increase in jobs last month, albeit the smallest monthly gain since October. Many employers have had to continue hiring to meet customer demand, as households in the US maintain their steady spending.
While the unemployment rate rose from 3.8% to 3.9% in April, it marked the 27th consecutive month that the rate has remained below 4%, tying the longest such streak since the 1960s.
“Certainly a less impressive jobs report than what we have seen,’’ said Michael Pugliese, senior economist at Wells Fargo. “But it's not a disaster: 175,000 is still quite strong, and unemployment below 4% is still quite healthy.’’ He anticipates that hiring, which averaged a strong 242,000 from February through April, will continue to slow down.
Last month's hiring was led by healthcare companies, which added 56,000 jobs. Warehouse and transportation companies added 22,000, and retailers added 20,000 jobs. Government at all levels, which had been hiring actively, only added 8,000 jobs in April, the lowest monthly total since December 2022.
Local governments didn’t add any jobs last month. According to Paul Ashworth of Capital Economics, state and local government revenue has recently declined.
The number of temporary help jobs decreased by more than 16,000. These positions are often considered a potential indicator of where the job market is heading because companies sometimes try out temps before making full-time hires.
The percentage of the adult population that either has a job or is seeking one remained unchanged at 62.7%, which is significantly lower than pre-pandemic levels.
The strength of America’s job market has consistently been better than almost anyone had expected. When the Fed started aggressively increasing rates two years ago to combat a severe inflation surge, most economists anticipated that the resulting rise in borrowing costs would lead to a recession and drive unemployment to very high levels.
From March 2022 to July 2023, the Fed raised its benchmark rate 11 times, bringing it to the highest level since 2001. As intended, inflation gradually decreased from a year-over-year peak of 9.1% in June 2022 to 3.5% in March.
However, the resilient strength of the job market and the overall economy, supported by steady consumer spending, has consistently kept inflation above the Fed’s 2% target.
The job market has displayed other indications of eventually slowing down. For example, this week, the government reported that job openings decreased in March to 8.5 million, the lowest in over three years. Nonetheless, this is still a large number of vacancies: Before 2021, monthly job openings had never exceeded 8 million, a limit they have now surpassed every month since March 2021.
On a month-over-month basis, consumer inflation has not decreased since October. The 3.5% year-over-year inflation rate for March was still significantly higher than the Fed’s 2% target.
Steven Kramer, CEO of WorkJam, an online platform that assists businesses like retailers and hospitality companies in managing their hourly workers’ tasks and training, mentioned that he is observing a reduction in the pressure to increase wages. However, companies are now focusing more on providing flexibility in shifts for workers who are increasingly managing multiple jobs to cover their expenses in the face of persistent inflation. “They’re allowing workers to switch a shift or pick up a shift,” he said.
Onur Kutlubay, CEO of You Parcel, a company based in Totowa, New Jersey, that offers shipping services to small e-commerce businesses, stated that it is still difficult to find skilled workers such as forklift operators and supervisors, while unskilled workers are easier to come by.
You Parcel operates in eight warehouse and storage facilities, with 43 employees, most of them in New Jersey. Kutlubay mentioned that he has had to continuously raise wages for its highly skilled employees. In 2020, skilled workers started at $16; now, hourly wages start at $25. For unskilled workers, the starting wages are now $16; in 2020, the figure was around $11.
He observed that people are choosing to work as Uber drivers or for delivery companies like DoorDash. “The jobs give them the opportunity to receive tips from customers,” he said. “They tend to be more appealing to people. That keeps them away from regular jobs like the ones that we offer.”
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D’Innocenzio made the report from New York.
